Formpipe: Public SE continues to show improvements - ABG

4% sales miss, mainly due to lower license sales We cut our EBIT estimates on higher costs We continue to see strong growth prospects Better-than-expected ACV number
Formpipe delivered solid Q2 results, albeit with a 4% sales miss, resulting in lower-than-expected EBIT (SEK 0m vs. ABGSCe SEK 8m). Lower license sales and a shortfall in delivery sales explained the deviation, with public customers increasingly requesting the SaaS model while Public Denmark saw sequentially lower delivery sales on the back of tough comps. Because of the former, ACV sales were strong at SEK 10m (ABGSCe SEK 8m), up from SEK 9m in Q2’21. This gives us comfort in continued strong SaaS sales ahead. Encouragingly, Public Sweden continued to show improvements, driven by a healthy public market and from upselling efforts on sales of products to existing customers. In our view, the main disappointment in Q2 was an elevated personnel turnover rate, as headcount decreased by 6 q-o-q. We expect this trend to revert, however, as an elevated rate during H1 has also been observed at many other IT companies.

Refreshing our stance on costs We trim our sales forecasts on the sales miss. This together with higher cost assumptions reflecting Formpipe’s forward-leaning growth strategy, results in cuts of 43-10% on ‘22e-‘24e EBIT. Segment-wise, we expect further improvements in Public Sweden, although we are cautious that the upcoming Swedish election could dampen short-term investment, while we believe that Private will continue on its growth trajectory.

A united Formpipe makes sense in current markets In conjunction with Q2, the company gave an update on its strategic review, in which it has concluded that a united Formpipe (Public and Private) is the best structure to continue using. Although Private is growing well, it is only around break-even in profitability terms (SEK 0.4m EBITDA in Q2). Given investors’ reduced appetite for such companies, we think it makes sense to use some of Public’s strong cash flow t ... Läs mer på ABG Sundal Collier

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/formpipe/Equity-research/2022/7/formpipe---public-se-continues-to-show-improvements/